Founder-market fit a key for startups

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– Chris Dixon is the co-founder of Hunch and of seed fund Founder Collective. This blog originally appeared here. The views expressed are his own. –

An extremely useful concept that has grown popular among startup founders is what eminent entrepreneur and investor Marc Andreessen calls “product/market fit,” which he defines as “being in a good market with a product that can satisfy that market.” Andreessen argues persuasively that product/market fit is “the only thing that matters for a new startup” and that “the life of any startup can be divided into two parts: before product/market fit and after product/market fit.”

But it takes time to reach product/market fit. Founders have to choose a market long before they have any idea whether they will reach product/market fit. In my opinion, the best predictor of whether a startup will achieve product/market fit is whether there is what David Lee calls “founder/market fit”. Founder/market fit means the founders have a deep understanding of the market they are entering, and are people who “personify their product, business and ultimately their company.”

A few points about founder/market fit:

Founder/market fit can be developed through experience: No one is born with knowledge of the education market, online advertising, or clean energy technologies. You can learn about these markets by building test projects, working at relevant companies, or simply doing extensive research. I have a friend who decided to work in the magazine industry. He discovered some massive inefficiencies and built a very successful technology company that addressed them. My Founder Collective partners Eric Paley and Micah Rosenbloom spent many months/years becoming experts in the dental industry in order to create a breakthrough dental technology company.

Founder/market fit is frequently overestimated: One way to have a deep understanding of your market is to develop product ideas that solve problems you personally have. This is why Paul Graham says that “the best way to come up with startup ideas is to ask yourself the question: what do you wish someone would make for you?” This is generally an excellent heuristic, but can also lead you astray. It is easy to think that because you like food you can create a better restaurant. It is an entirely different matter to rent and build a space, market your restaurant, manage inventory, inspire your staff, and do all the other difficult things it takes to create a successful restaurant. Similarly, just because you can imagine a website you’d like to use, doesn’t mean you have founder/market fit with the consumer Internet market.

Founders need to be brutally honest with themselves: Good entrepreneurs are willing to make long lists of things at which they have no ability. I have never built a sales team. I don’t manage people well. I have no particular knowledge of what college students today want to do on the Internet. I could go on and on about my deficiencies. But hopefully being aware of these things helps me focus on areas where I can make a real contribution and also allows me to recruit people that complement those deficiencies.

Most importantly, founders should realize that a startup is an endeavor that generally lasts many years. You should fit your market not only because you understand it, but because you love it — and will continue to love it as your product and market change over time.

The rise of entrepreneurial spirit is undoubtedly related to the economy but I believe there is an even larger trend causing this shift. People are disatisfied with the status quo of working for big business, working long hard hours with little recognition, remuneration or respect. There is a prevailing trend towards increasing Quality of Life, Achieving a healthier and less stressful lifestyle and generally enjoying life. I agree that for the new entrepreneur to be successful, a product/market fit must be identified. But with today’s social media advertisisng trend, global access to markets through informed use of the internet and access to companies specializing in training new business owners to use these tools – I believe that the perfect scenario exists for hard working, determined people to begin their own businesses. In fact, that is what I am in the process of doing. I’m taking advantage of the lifestyle trend, the popularity of wine and beer, and the desire for a less stressful lifestyle by introducing a new concept to the art of wine tastings. I am offering In Home Wine tastings and beer tastings (along with an ecommerce website for wine glasses, wine accessories, etc). Please check out the site at http://www.inhomewinetasting4you.com/ I look forward to any comments or advise.

The most successful product/market fit is achieved when the founder has a good experience of the market. If the founder really understands the market she can be effective with a new product or service because she understands the needs of the market. Once you have satisfied the market needs you have the necessary skills to create a new product-market fit. The Small Biz 1 article “Advertising a New Product is as Easy as 3-2-1″ talks about the importance of market understanding and knowledge in order to successfully market a new product: http://smallbiz1.com/advertising-a-new-p roduct.html

Author Profile

Chris Dixon is co-founder of Hunch and founder of Founder Collective, and an investor in many early-stage companies like Skype and Foursquare. Previously he co-founded Siteadvisor, which was acquired by McAfee.